IMPORTANCE OF GWADAR PORT FOR CHINA

SYED FAZL-E-HAIDER
Nov 24 - 30, 2008

Gwadar port is important for China from both economic and security points of view. It will be linking its western province of Xinjiang with Pakistan. In May 1999, China showed interest in helping out to jumpstart the construction of the port by offering financial and technical assistance. Beijing has also set up a dry port at Sost near the Pakistan-China border. Western China can benefit from the Gwadar seaport through the Sost dry port, which will also create a ribbon of economic activity and hundreds of new jobs along the proposed highway linking Gwadar with the Karakoram Highway in the north.

The fastest growing economy of China would desperately need the port facilities that would ideally be in the proximity area of Gulf but yet to be outside the sensitive Strait of Hormuz. China's eastern seaboard ports are 3,500 kilometers away from Kashgar, western China's main city, whereas the distance from Kashgar to the Pakistani coastal town of Gwadar on Balochistan coast, is only 1,500 kilometers. Proximity of Xinjiang to Gwadar also makes it feasible and cost-effective for China to carry out trade through this port which is close to the Gulf, Central Asia, Europe and Africa. Given this fact, there is an obvious huge cost advantage for China to use Gwadar as the gateway port for its western region.

Pakistan and China plan to develop Gwadar port as a landing point for international cargo heading to western China. It is expected that the port would cut down the sea journey time for imports to China and save the country's millions of dollars. It can also give China access to the ports in the Gulf region. The two countries plan to make Gwadar a gateway port for Central Asia and Xinjiang. Under a memorandum of understanding (MOU) signed by the two countries, China will build a 90-kilometre highway-link connecting the Chinese side of the Karakoram Highway to the Russian-built highway network that already connects all the five Central Asian Republics(CARs). This regional highway network will directly be linking Gwadar to Xinjiang and the landlocked CARs. Since outflow of goods from western China and Central Asia reaching Gwadar will pass through this overland trade route, Pakistan could earn millions of dollars a year in terms of port and cargo-handling charges and also as freight charges for import cargoes and export goods of the CARs and western China to/from Gwadar for shipment to world markets.

Gwadar is situated atop the shipping lane through which at least 60 per cent of the world oil passes. Dubai is about 500 nautical miles from Gwadar. A vessel takes more time and money for calling at Gulf ports. After the first Gulf war, Islamabad realized the need of constructing a deep-sea port at Gwadar that would have the potential of handling traffic from the ports of Bangladesh, Sri Lanka, East Africa, Oman, UAE, Qatar, Bahrain, Saudi Arabia, Kuwait, Iran, Iraq and the land-locked countries of Afghanistan, Tajikistan, Kyrghyzstan, Uzbekistan, Turkmenistan and Kazakhstan. Gwadar can provide a strategic base to Chinese for expanding their stakes and enhancing their influence to all corners of the world. It is therefore currently the focus of Chinese plan for energy import. China needs Gwadar port facilities for future oil and gas import.

While there is a suggestion in Pakistan that Gwadar should be declared as a free oil port, the Beijing is reportedly negotiating with Islamabad on around five oil and gas pipelines with CARs. Gwadar port has become the China's most favorable choice for oil trade, as the present choke point of oil trade at Hormuz is becoming congested and it could affect global energy security as well as regional peace.

Gwadar lies just 624 nautical kms to the east of Strait of Hormuz. This route provides China an alternative to Strait of Malacca through which 80% of China's oil imports flow. Gwadar port on the Arabian Sea coast would set up trade and energy corridors to give western China access to the sea. The crude oil imports from Iran, the Gulf States and Africa can be transported overland to northwest China through the port. Plans are also under study for transporting crude oil to China from Gwadar port, across Balochistan and NWFP, and through the mountainous regions of the Northern Areas, over the Khunjerab Pass to northwestern China. Pakistan has suggested building a railway as one option. Another option is to use an upgraded Karakoram Highway to transport the oil in tanker lorries.

At present, China imports a third of its crude oil consumption. China is increasingly looking to its Asian neighbors for oil and gas supplies because of its growing reliance on imports to feed its booming economy. Pakistan provides China a viable and the shortest possible option to import oil from Saudi Arabia, or any of Gulf countries through its southwestern coastal town of Gwadar. During the visit of former Pakistani President Musharraf to China in 2006, Islamabad had offered a 'trade corridor' to meet Beijing's energy requirements. Saudi Arabia has shown willingness to increase oil exports to China and the King Abdullah had reportedly shared the matter with Islamabad to help Saudi Arabia in extending oil exports to China. Pakistan would help China in constructing the strategic pipeline from Gwadar to its borders enabling it to import oil from Saudi Arabia. China has also shown interest in a trans-Himalayan pipeline to carry Middle Eastern crude to western China. It would allow Beijing to reduce the portion of its oil shipped through the narrow and unsafe Strait of Malacca.

From the very beginning, the China had planned to develop Pakistani seaport of Gwadar on the pattern of its Shenzhen port. Beijing had pledged $50 billion investment for two-phased mega seaport project at Gwadar in 2001. The lion share of the investment had been planned for the petrochemical industry. Today, the Great United Petroleum Holdings Company Limited (GUPC) of China is carrying out the feasibility study of the US$12.5 billion strategic project of petrochemical city at Gwadar. Gwadar is likely to evolve on the lines of China's Shenzhen if the things go as have been planned by Islamabad and Beijing. So far China has been the biggest investor, and hence the major stake-holder in the development of Gwadar port city. Like Shenzhen, Gwadar under Chinese is likely to emerge as boomtown in southwestern Pakistani province of Balochistan. The Chinese-built Gwadar deep-sea port has been handed over to Port of Singapore Authority International that will run it for 40 years.

Pakistan can gain from China's significant success in the launching of special economic zones like Shenzhen, which has undergone steady growth, achieved great successes and accumulated experience in its pioneering and exploratory work. It has been successful in attracting foreign investment, introducing advanced technology and producing readily marketable and highly competitive products to expand exports.